9 SPECIALIZED BANK
SERVICES
9.1 International Banking
9.2 Insurance and Brokerage
9.3 Cash Management
9.4 Trusts
Slide 1
Lesson 9.1
INTERNATIONAL
BANKING
GOALS
Identify three types of financial institutions
engaged in international banking
Describe international services offered by
banks
Slide 2
STRUCTURE OF INTERNATIONAL SERVICES
lForeign banks
lU.S.-based international banking
lOther types of international operations
lSpecial considerations
lFinancial risk – hard to get reliable information
lCurrency risk – Value of currency can fluctuate
lCountry risk – political, social, legal and economic
conditions
Slide 3
INTERNATIONAL SERVICES
lTrade financing
lLetters of credit – Letter given by bank on behalf of
buyer
lDrafts and wires – Similar to a check, order given
from one party to another
lInternational collections -
lForeign currency exchange – Must exchange money
to do business in another country
Slide 4
INTERNATIONAL SERVICES - continued
lTrade consulting
lU.S. export-import (Ex-Im) bank
lOverseas private investment corporation (OPIC)
lSmall business administration (SBA)
Slide 5
Lesson 9.2
INSURANCE AND
BROKERAGE
GOALS
Explain the effects of the Gramm-Leach-
Bliley Act of 1999
List typical insurance and brokerage
products available from financial institutions
Slide 6
A NEW ERA
lThe old world: Glass-Steagall Act: Response to the
Great Depression, Banks could not own brokerage firms. Banks
could no longer compete with other financial services
lThe new world: Gramm-Leach-Bliley ACT
(GLBA) Banks could now could pursue insurance and
securities businesses. Consumers can prohibit sharing of private
information to third party. (opt-out)
lLimits and regulation: State laws concerning banks are
accountable to the nation. Prevents states from making laws
that can be detrimental to the interest of the nation
Slide 7
PERSONAL INSURANCE PRODUCTS
lAuto insurance
lCredit insurance
lDisability insurance
lLife insurance
lHealth insurance
lHomeowner’s insurance
lMortgage disability insurance
lTitle insurance
Slide 8
BUSINESS INSURANCE
lCommercial liability
lShort-term disability
lLong-term disability
lHealth insurance
lOfficers’ liability
lProperty
lWorkers’ compensation
Slide 9
BROKERAGE SERVICES
lBrokerage refers to bringing together parties
interested in making a transaction, such as
buying and selling shares of stock.
lA broker charges a fee to execute the
transaction.
lBanks now offer full investment services.
Slide 10
Lesson 9.3
CASH MANAGEMENT
GOALS
Explain why banks are in a good position
to offer cash management services
List several cash management services
banks perform for businesses
Slide 11
SYSTEM IN PLACE FOR CASH MANAGEMENT
lEvery business needs to disburse and collect
cash to complete business transactions.
lBanks are in a good position to provide cash
management services to businesses for a
number of reasons.
lExperience
lBusiness knowledge
lTechnology
lIndustry expertise
Slide 12
CASH MANAGEMENT
lAccounting services
lBank collection services
lInformation services
lCredit card services
lCapital services
Slide 13
ACCOUNTING SERVICES
lPayroll: All functions of payroll are managed
lAccounts payable: Short term debt usually 60 days or less
lAccounts receivable: services or merchandise sold on
credit collected by bank
Slide 14
BANK COLLECTION SERVICES
lDeposit service: Customers can make deposits in various
ways
lLockbox service: Accounts receivable are deposited
directly to bank
lZero-balance accounts: Accounts are reconciled daily
lAutomated Clearing House (ACH) Network: Highly
efficient electronic banking system
Slide 15
INFORMATION SERVICES
lElectronic Data Interchange (EDI)
lComputer-to-computer exchange of business
information
lBanks can advise and provide services
Slide 16
CREDIT CARD SERVICES
lCredit card processing
lStored-value card: Also known as smart card, Card itself
holds value with in magnetic strip
lCredit analysis
Slide 17
CAPITAL SERVICES
lCapital investments: Expenses incurred for business use,
example: printing press, fleet of trucks
lFinancing: Advise clients on how to keep debt-to-equity ratio
low
lFactoring: Buying debt at a discount
Slide 18
Lesson 9.4
TRUSTS
GOALS
Explain what trust services are
Identify important types of trust services
banks provide
Slide 19
WHAT ARE TRUST SERVICES?
lA trust is an arrangement by which one party
holds property on behalf of another party for
certain defined purposes.
lThe donor, or settlor, is the person who creates
a trust.
lThe beneficiary is the person for whose benefit
the property is held.
lCorpus, or res, refers to the property that is held.
Slide 20
TRUST SERVICE PRODUCTS
lRetirement planning: IRA, 401(k), variable annuity
lEstate planning: Family arranges transfer of
assets
lEstate settlement: Value, taxes, filing, distribution of
assests
lTestamentary trust: Estate is managed for the heirs
lCharitable remainder trust: Money given to charity
lLiving trust: Setting up while a person is living. Describes
transfer of property.
Slide 21
RETIREMENT PLANNING
lIRA: Great way to save for retirement.
l Regular IRA: Money taxed when withdrawn
l Roth IRA: Money taxed at time of investment
l401(k) plan: Employees retirement account
lVariable annuity: Similar to regular IRA only more flexible.
Tax deferred growth
Slide 22
ESTATE PLANNING
l Estate planning is the process by which an individual or family
arranges the transfer of assets in anticipation of death.
l An estate is the total property, real and personal, that an
individual owns.
l The cornerstone of any estate plan is a will, a document by
which the individual gives instructions as to what is to happen
upon his or her death in regard to property and remains.
l Probate is a court proceeding that settles an estate’s final debts
and formally passes legal title to property from the decedent to
his or her heirs.
Slide 23
ESTATE SETTLEMENT
lIdentifying and valuing the estate assets
lPaying creditors, estate expenses, and taxes
lPreparing and filing the necessary tax
documents with federal and/or state authorities
lDistributing assets to beneficiaries
Slide 24
TESTAMENTARY TRUST
lTestamentary trusts are established by a will and
take effect at the donor’s death.
lThey receive the assets of the estate to hold and
manage for the benefit of the heirs.
Slide 25
CHARITABLE REMAINDER TRUST
A charitable remainder trust (CRT) is an irrevocable
trust designed to convert the highly appreciated
assets of a trustor into a lifetime income stream
without generating estate and capital gains taxes.
Slide 26
LIVING TRUST
A living trust is a legal document that provides an
expedient way to transfer property at a person’s
death.
Slide 27
